* To buy General Parts, biggest operator of Carquest chain
* New company to have annual sales of $9.2 bln
* Advance Auto 3rd-qtr sales rise 4.3 pct
* Advance Auto shares jump as much as 20 pct
(Adds CEO quote, analyst comment; updates shares)
By Sagarika Jaisinghani
Oct 16 Advance Auto Parts Inc will buy
1,418 outlets of the Carquest chain to boost its auto repair
operations to complement its car parts business, sending its
shares up as much as 20 percent to a record high.
Advance Auto, which sells products such as batteries, air
fresheners and engine parts, said it would buy General Parts
International Inc for just over $2 billion, creating the largest
North American retailer of auto parts.
General Parts is the biggest operator of the Carquest chain,
which runs auto repair shops and car parts stores. General Parts
also owns Worldpac, the No.1 supplier of replacement parts for
imported car and truck brands.
Carquest and Worldpac - two of the largest automotive retail
parts suppliers in North America - had sales of $2.9 billion in
the last 12 months.
"We view Advance Auto's decision as a smart strategic
acquisition that vaults the company into a much stronger
position in the faster growing and more attractive do-it-for-me
segment and gives them a crown jewel in Worldpac," Credit Suisse
analyst Simeon Gutman said in a client note.
Advance Auto said the General Parts purchase will hugely
increase its customer reach from coast-to-coast in North
America, where parts sales have slipped as more Americans buy
The company has been trying to improve its footprint in the
commercial repair industry. It bought the second-largest
operator of Carquest stores, BWP Distributors Inc, in December.
Commercial repair accounts for about 85 percent of
Advance Auto Chief Executive Darren Jackson said commercial
sales would jump to 55 percent of total revenue from 35 percent
after the General Parts deal.
"We continue to expect (that) industry sales to commercial
customers will outpace do-it-yourself (DIY) long term as cars
get more complicated, baby boomers age, and younger demographics
are less involved with DIY repairs," Stifel Nicolaus analyst
David Schick said.
The combination of Advance Auto Parts and General Parts
would create a company with $9.2 billion in annual sales, just
above those of the current biggest player, AutoZone Inc.
AutoZone reported adjusted sales of about $9 billion for the
year ended Aug. 31.
Advance Auto said it expects to save about $160 million
annually within three years of the deal closing, scheduled for
late 2013 or early 2014.
The company will finance the transaction with cash and debt.
It said it has received financing commitment from JPMorgan Chase
Advance Auto will have to pay a termination fee of $185
million, under certain circumstances, if the deal falls through.
Blackstone Advisory Partners LP and JP Morgan Securities LLC
served as financial advisers to Advance Auto. Kirkland & Ellis
LLP was the legal adviser.
Wells Fargo Securities LLC and Orr Group LLC were financial
advisers to General Parts and its legal advisers were Manning
Fulton & Skinner PA and Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan LLP.
Advance Auto also said on Wednesday that sales for the
quarter ended Sept. 30 rose 4.3 percent due to its purchase of
BWP Distributors. Sales at stores open for at least a year fell
Shares of Advance Auto were up 16 percent at $95.63 at
midday on the New York Stock Exchange. Shares of AutoZone and
O'Reilly Automotive Inc also rose 1 percent.
(Additional reporting by Sakthi Prasad and Neha Dimri in
Bangalore; Editing by Supriya Kurane, Sriraj Kalluvila and Maju